Charting a way ahead for the IDZ in Saldanha Bay

Even before legislation to overhaul industrial development zones (IDZ) comes into effect, plans are at an advanced stage to proclaim the country’s fifth zone at Saldanha Bay, 120km north of Cape Town.

The town would fit well with government’s intention to decentralise industrial development to economically underdeveloped parts of the country. It has a population size of about 77800 and one of the country’s largest and deepest ports.

Department of trade & industry (DTI) director-general Lionel October says government could decide to designate Saldanha as an IDZ under existing legislation if new legislation is not in force yet. The new special economic zone (SEZ) bill may take another year before it is passed into law.

When the bill was announced, government acknowledged that existing IDZ s were chosen on the basis of policy decisions, rather than with any substantive economic rationale.

October was at pains to emphasise that new IDZ s would be declared only if their long-term economic viability could be proved. Setting up an IDZ requires a significant investment in infrastructure, which government will need to ensure does not go to waste.

The Western Cape Investment & Trade Promotion Agency (Wesgro), an agency of the provincial government, was tasked with the feasibility study for the Saldanha Bay IDZ, which was completed in October.

However, it has been criticised for failing to address concerns about employment.

Economist at the Stellenbosch School of Public Leadership Management & Planning, and a member of the Langebaan Ratepayers Association, Johan Ackron says the need to address unemployment on the West Coast is obvious. But he says the skills profile of people in the area does not necessarily fit what will be required in the construction of an IDZ.

The feasibility study, says Ackron, has not said how it will employ local unskilled labour instead of importing skills from elsewhere.

He has also questioned the state’s reason for choosing Saldanha Bay. In addition he says existing research does not demonstrate why businesses would relocate their operations to Saldanha Bay.

The association is not opposed to an IDZ in principle but it wants government to provide justification for it, to avoid the creation of a white elephant.

“Our concern is whether bringing an IDZ to Saldanha represents the best use of public money for this area.”

Head of Wesgro IQ Jacyntha Maclennan says the agency is incorporating comments from the public participation process into its final report. It is also compiling a detailed business plan for the IDZ, which will be submitted to the DTI . This will include specific references for each of the proposed industries.

Once the DTI is satisfied with the application , it will have to be approved by cabinet .

If it does go ahead, the study says the Saldanha region could experience growth of between 86% and 233% over a 25- year period.

It says there is a strong business case for an IDZ, and lists five areas of development (see graphic). Mineral beneficiation has been incorporated into the plan, in keeping with government’s strategy to develop downstream, job-creating industries, using natural resources.

The study has also considered funding, and says that for every R1 invested by government, the private sector would spend R4. In addition, it found that for every R1 spent by government, it would recoup an average return of 30c.

Private-sector funding, it says, would be required in most sectors.

Based on medium levels of investment, the study shows that foreign direct investment over 25 years would amount to about R18,5bn. Employment, it states, would climb to about 6670 direct jobs over the 25-year period.

It estimates that the IDZ could contribute annually between R11,2bn and R31,6bn to the national economy.

However, its success will depend on government’s willingness to provide incentives for business. If not, Saldanha Bay’s IDZ might face the same uphill battles as the Coega IDZ